By Emily, Director at Proceed Property Lettings · 5 Nov 2026
Two tax changes are landing on landlords at the same time: Making Tax Digital is already live for larger landlords, and the Budget on 28 October raised the tax on rental profit again from April 2027.
I’ve spent 10 years in lettings, and know it’s rare to see two changes this big arrive together. I’m not a tax adviser, so please treat this as a guide rather than advice and speak to your accountant about your own figures. What I can do is set out the facts plainly, so you know what to ask and what to do next.
The short version
- Rental income tax is going up. From April 2027, landlords who own in their own name pay 24%, 44% and 49% on rental profit, up from 20%, 40% and 45% today.
- Quarterly reporting is here. Making Tax Digital applies to gross income over £50,000 now, £30,000 from April 2027 and £20,000 from April 2028.
- The next update is due Saturday 7 November. There are no penalty points for late quarterly updates this tax year, but all four updates still have to be filed.
- Some things stood still. Capital Gains Tax rates and Stamp Duty were not changed, and the rate rise doesn’t apply to profits held in a limited company.
The Budget: property income tax rises again from April 2027
On 28 October the Chancellor, John Healey, announced a further two percentage points on tax on property income from April 2027, on top of the two points announced in last year’s Budget. For landlords who own in their own name in England, Wales and Northern Ireland, that takes the property rates to 24% (basic), 44% (higher) and 49% (additional). Today’s rates are 20%, 40% and 45%. The change is due to be legislated in the Finance Bill 2026-27, so it isn’t law yet.
Mortgage interest relief for individuals continues to be given as a tax credit at the property basic rate. On the Treasury’s own costings that should rise to 24% too, rather than the 20% credit available now. No reform of that restriction was announced.
The increase affects landlords who own personally or in partnership, not those who hold property through a limited company. The Office for Budget Responsibility has warned that the tax measures taken together risk pushing rents up over time.
What didn’t change
- Capital Gains Tax on residential property stays at 18% and 24%, with the £3,000 annual exempt amount.
- Stamp Duty: no new measures in the Budget.
- Mortgage interest restriction: no further reform announced.
- Limited companies: the property income increase doesn’t apply to profits held in a company.
What it means in pounds
Every £10,000 of taxable rental profit costs £400 more tax from April 2027, because the rate rises by four percentage points. Find your rough profit below.
| Taxable rental profit | Extra tax a year |
|---|---|
| £5,000 | £200 |
| £10,000 | £400 |
| £20,000 | £800 |
| £40,000 | £1,600 |
These figures are before any mortgage interest tax credit, which should also rise.
A worked example with a mortgage. A higher-rate landlord has £20,000 of rental profit before finance costs and £10,000 of mortgage interest. Today the tax is 40% of £20,000 (£8,000) less a 20% credit on the interest (£2,000), so £6,000. From April 2027 it is 44% (£8,800) less a 24% credit (£2,400), so £6,400. That is £400 more, assuming the credit rises to 24% as expected.
These examples are simplified and ignore other income and allowances. Your accountant can work out your exact figure.
Making Tax Digital: quarterly updates are now part of being a landlord
Since 6 April 2026, landlords and sole traders with gross qualifying income above £50,000 have had to keep digital records and send HMRC a quarterly update through compatible software. This replaces the single annual Self Assessment return for that income. HMRC wrote to around 864,000 people in the first wave, and industry press reported that hundreds of thousands missed the first deadline in August.
The quarterly updates are summaries of your income and expenses. They are not tax returns and they don’t change when you pay tax. Here is the 2026/27 calendar.
| Update | Period covered | Deadline |
|---|---|---|
| 1 | 6 April to 5 July 2026 | 7 August 2026 (passed) |
| 2 | 6 April to 5 October 2026 | Saturday 7 November 2026 |
| 3 | 6 April to 5 January 2027 | 7 February 2027 |
| 4 | 6 April 2026 to 5 April 2027 | 7 May 2027 |
Updates are cumulative, so each one covers the year so far. If you’d rather report by calendar quarter (1 April to 30 June and so on), you can elect to, and the deadlines stay the same. Your tax return for 2026/27 then follows after the year-end, by 31 January 2028.
Penalties: a soft landing, for now
HMRC is not issuing penalty points for late quarterly updates in 2026/27. But it must receive all four updates before you can submit your tax return, so a free year is not a year without deadlines. From April 2027 the points system applies: reach four points and a £200 penalty follows.
Does Making Tax Digital apply to you?
It applies if your gross income from property, plus any self-employed income, is above the threshold for the year. The threshold is falling in two steps.
| Gross income over | Starts | Based on |
|---|---|---|
| £50,000 | 6 April 2026 | 2024/25 income |
| £30,000 | 6 April 2027 | 2025/26 income |
| £20,000 | 6 April 2028 | 2026/27 income |
The £20,000 step was still subject to final legislation at the time of writing, so check GOV.UK before relying on it.
A few things are worth knowing:
- It’s gross income, not profit. The threshold looks at rent received before expenses. A landlord taking £55,000 in rent is in scope even if the profit is far lower.
- Joint owners count their share. A property earning £50,000 and owned equally by two people gives each of them £25,000 of qualifying income.
- Companies are outside it. Making Tax Digital for Income Tax covers individuals. Property held in a limited company pays Corporation Tax instead.
What if your rental income is under £20,000?
You’re not required to join, and you carry on with the usual annual Self Assessment return. You can still join voluntarily if you want to get ahead. But the property tax rise can still apply to you: if you own in your own name and pay tax on rental profit, the higher rates apply however small the portfolio. Someone with £10,000 of profit would pay about £400 more from April 2027, unless their allowances already cover that profit.
Five steps to get ready
Whether you’re already in the scheme or about to be, these steps make quarter-end painless.
- Check your numbers. Look at the gross rent on your 2025/26 return, plus any self-employed income. Over £30,000 means you’re in from 6 April 2027.
- Choose HMRC-recognised software. HMRC doesn’t provide its own, but it publishes a list of recognised products on GOV.UK, with free and paid options and some built for landlords.
- Give your rental its own bank account. Running rent and costs through one dedicated account makes digital records far easier to keep.
- Keep records as you go. Log repairs, insurance and agent fees when they happen, not at quarter-end. If we manage your property, ask us for your statements.
- Diarise the dates and talk to your accountant. Put 7 February and 7 May in the calendar, and ask how the April 2027 rate rise affects how you hold your properties.
Four things landlords often get wrong
“I’ll now have to pay tax every quarter.” Quarterly updates are summaries of income and expenses, not tax returns or payments. Your payment dates (31 January and 31 July) haven’t changed.
“My profit is well under £50,000, so it won’t apply to me.” The threshold looks at gross income before expenses. A landlord taking £55,000 in rent is in scope even if the profit is far lower.
“There are no penalties this year, so I can ignore it.” There are no penalty points for late quarterly updates in 2026/27, but HMRC must receive all four before you can submit your tax return. The points system applies from April 2027.
“The new property tax rates will hit my limited company too.” The increase applies to individuals and partnerships. Companies pay Corporation Tax, though dividends you draw have their own rates.
Also on landlords’ radar
- More rental data heading to HMRC. The Budget confirmed a consultation on widening the rental income data that letting agents and deposit schemes report to HMRC. The duty would sit with agents and schemes, not landlords, but accurate returns matter more than ever.
- Personally or through a company? Some landlords are weighing up incorporation. Moving existing properties into a company can trigger Capital Gains Tax and Stamp Duty, and incorporation relief must now be claimed. It’s a long-term decision, so take specialist advice first.
- The Renters’ Rights Act. In England, Section 21 “no-fault” notices ended on 1 May 2026, and possession now goes through Section 8 grounds. Wales has its own rules, so what applies to you depends on where your property is.
- Time for a rent review? With tax costs rising, it’s a sensible moment to check your rent against the local market.
How we can help
Taxes and rules will keep changing, and your letting agent shouldn’t make life harder. At Proceed Property we cover everything from finding quality tenants to full property management, tailored to how hands-on you want to be. My background spans valuations, compliance, legislation and property management, so the details don’t slip. You can reach us seven days a week by email, phone, WhatsApp or social media, and Client Money Protection is in place.
If you own a rental in Chepstow, Caldicot, Lydney or the surrounding area, or you’re reviewing your portfolio ahead of April, I’d be glad to help. Email me at emily@proceed-property.co.uk or call 01291 428666 to arrange a rental appraisal, or read what other landlords say on our testimonials page.
Important information
This article is general information only and is not tax, legal or financial advice. Figures reflect announcements made at the time of writing (5 November 2026), including Budget measures that are still subject to legislation. Please speak to a qualified accountant or tax adviser about your own circumstances.
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